An imperfect pleading (apparently) still perfects a construction lien

ScalesA Decision (arising from a motion to have a construction lien discharged and security posted returned) in 984499 Ont. Inc. v. 1159337 Ont. Inc. et al. was released by the Ontario Superior Court of Justice on July 2, 2013, and we are – yet again – reminded how forgiving the Ontario courts can be when a lien claimant has arguably failed to comply with some ostensibly fundamental aspect of the Construction Lien Act.

The facts are (whittled down) as follows:

The Plaintiff (a general contractor for a hotel renovation) was unpaid and preserved its lien by registering a construction lien within the required time.  The owner posted security with the Court in order to vacate the lien from title and the lien claimant commenced an action.  However, the action commenced by the Plaintiff did not:

    • expressly seek to enforce a construction lien – against the security in Court or against the land;
    • mention the lien claim registered on title, the vacating order, the monies paid into court or perfection of the lien; and
    • mention or plead the Construction Lien Act at all other than to plead reliance on the trust provisions of the Construction Lien Act.

The Defendant (owner) brought a motion for a ruling that the construction lien had not been perfected in accordance with the Construction Lien Act because the Statement of Claim was not in the nature of an action to enforce the lien as is required by section 36(3) of the Construction Lien Act and that it could not be an action to enforce a lien because it pleaded the trust provisions of the Construction Lien Act and section 50(2) says that an action to enforce a lien and a trust claim shall not be joined together.

Mr. Justice Whalen dismissed the motion and, relying on Rules 1.04(1) and 26 of the Ontario Rules of Civil Procedure, allowed the Plaintiff to “cure” or “fix” the Statement of Claim to effectively bring it in compliance with the Construction Lien Act.

My own view is that this Decision is wrong and, like other similar Decisions, is in stark contrast to what I think is a better line of cases in B.C. (under its fundamentally very similar Builders Lien Act) which hold that lien legislation, while being remedial, creates an extraordinary remedy (it allows one party to encumber the property of another before judgment and creates priorities between creditors, etc) that is strictly a creature of statute and so the legislation must be interpreted strictly and the court has no discretion to depart from the express statutory requirements.  I have little doubt that if 984499 Ont. Inc. v. 1159337 Ont. Inc. et al. had been decided in B.C., the Defendant’s motion would have succeeded.  See, for example, Nita Lake Lodge Corp. v. Conpact Systems (2004) Ltd., a 2006 Decision of the Supreme Court of B.C. in which a $300K+ lien was extinguished solely because the lien claimant failed to properly name the company with which it had contracted and from which it claimed to be owed money.

While, the Ontario Construction Lien Act contains a curative provision at section 6, it does not apply to pleadings and is not so broad as to convert a Statement of Claim that does not seek to obtain or enforce a construction lien into one that does.  Similarly, this wasn’t a case where there was some poorly drafted paragraphs but it was still, in substance, a claim to enforce a construction lien as required by the Construction Lien Act such that a Rule 26 amendment could improve the pleading or fix some minor flaws.  Rather, it was an action that did not plead material facts to support a finding of a lien or claim a lien as a remedy and so the Plaintiff, in my view, had not perfected its lien as required by section 36 of the Construction Lien Act and the lien should have been discharged and the security returned to the owner.